Q2 2024 Gold Resource Corp Earnings Call - Q&A
Operator: Good afternoon, ladies and gentlemen, and welcome to the Gold Resource Q2 2024 earnings call. At this time, all lines are in listen-only mode.
Good afternoon, ladies and gentlemen, and welcome to the Kohl's, we used to always Q2 2024 earnings call. At this time all lines are in listen only mode. Following the presentation. It will conduct a question and answer session. If at any time. During this call you require immediate assistance. Please press star zero.
Operator: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, August 7, 2024. I would now like to turn the conference over to Chet Holyoak. Please go ahead.
Chad: Oh for the operator this call is being recorded on Wednesday August seven 2020 before I would now like to turn the conference over to Chad told you B School ahead.
Chet Holyoak: Thank you, Ina, and good morning to everyone. On behalf of the Gold Resource team, I would like to welcome you to our conference call covering our second quarter 2024 results. Please note that certain statements to be made today are forward-looking in nature and, as such, are subject to numerous risks and uncertainties, as described in our annual report on Form 10-K and other SEC filings. Please note that all amounts referenced during this presentation are in U.S. dollars unless otherwise stated.
Chad Tolley: Thank you Ina and good morning to everyone on behalf of the gold resource team I would like to welcome you to our conference call covering our second quarter 2024 results.
Speaker Change: Before we begin the call there are a couple of housekeeping matters I would like to address.
Speaker Change: Please note that certain statements to be made today are forward looking in nature and as such are subject to numerous risks and uncertainties.
Speaker Change: As described in our annual report on Form 10-K, and other SEC filings.
Speaker Change: Please note all amounts referenced during this presentation are in U S dollars unless otherwise stated.
Allen Palmiere: Joining me on the call today is Allen Palmiere, our President and CEO, and Alberto Reyes, our Chief Operating Officer. Following Allen, Alberto, and my prepared remarks, we will be available to answer questions. This conference call is being webcast. For those of you joining us on the webcast, you can download a PDF copy of the conference call slides. The event will also be available for replay on our website later today. Yesterday's news release that was issued following the close of the market and the accompanying Form 10-Q have been filed with the SEC on EDGAR and are also available on our website at www.goldresourcecorp.com. I will now turn the call over to Allen. Thank you.
Speaker Change: Joining me on the call today is Alan tell me are our president and CEO and Alberto <unk>, our Chief operating officer.
Speaker Change: Following Alan Alberto and my prepared remarks, we will be available to answer your questions.
Speaker Change: This conference call is being webcast for those of you joining us on the webcast you can download a PDF copy of the conference call slides.
Speaker Change: The event will also be available for replay on our website later today.
Speaker Change: Yesterday's news release that was issued following the close of the market and the accompanying Form 10-Q have been filed with the SEC on Edgar and are also available on our website at Www Dot Gold resource Corp Dot com.
Speaker Change: I will now turn the call over to Alan.
Allen Palmiere: Thank you, Chet, and good morning, everyone. I'd like to thank you for joining our second quarter conference call. I'd like to address a few points first, then Alberto will address operations, followed by Chet with the financial results. Following their remarks, I'll make a few closing comments, and we will take questions.
Alan Alberto: Thank you Chuck and good morning, everyone.
Alan Alberto: I'd like to thank you for joining our second quarter conference call I.
Alan Alberto: I would like to address a few points first and then Alberto will address operations, followed by Jeff with the financial results.
Speaker Change: Following their remarks I'll make a few closing comments, we will take questions.
Allen Palmiere: The second quarter continued the trends that we've seen over the past few quarters with similar results. Limited working areas and challenging ground conditions resulted in lower mine production than planned. This was compounded by work stoppages due to blockades on the public roads and extremely wet weather conditions.
Speaker Change: The second quarter continued the trends that we've seen over the past few quarters with similar results.
Speaker Change: Limited working areas in challenging ground conditions resulted in lower mined production of black.
Speaker Change: This was compounded by work stoppages due to blockades on public roads and extremely wet weather conditions.
Allen Palmiere: That being said, we are continuing to cover our costs and anticipate positive cash flow for the balance of the year. We are looking at various alternatives to increase productivity and profitability, and hopefully, we'll see results in the fourth quarter. The elephant in the room is the market meltdown earlier this week. The capital markets were off, as well as commodities. The only bright spot for Gold Resource Corp was the significant devaluation of the peso. As you know, approximately 50% of our operating costs are denominated in the peso. So the relative decline in the rates results in a corresponding decrease in operating costs. This partially offsets the decline in commodity prices.
That being said we are continuing to cover our costs in this space positive cash flow for the balance of the year.
Speaker Change: We are looking at various alternatives to increase productivity and profitability and hopefully we will see results fourth quarter.
Speaker Change: The elephant in the room is the market meltdown earlier this week the capital markets were off as well as commodities the only bright spot for gold resource Corp was the significant devaluation of the peso.
Speaker Change: As you know approximately 50% of our operating costs are denominated in peso.
Speaker Change: So the relative decline in the rates results in a corresponding decrease in operating costs.
Speaker Change: This was parse this partially offset the decline in commodity prices.
Allen Palmiere: We have undertaken a planning exercise to ensure that, to the extent possible, we can predict by stope for the balance of the year. This exercise reflects our year-to-date productivity and mechanical availability. The assumptions are conservative, and the broadcast shows us to be beginning to build cash in Q4. Longer term, we are looking at what is necessary to allow us to accelerate access into the new areas of Three Sisters and Gloria.
Speaker Change: We've undertaken a planning exercise to ensure that to the extent possible, we can predict by stope for the balance of the year.
Speaker Change: This exercise reflects.
Speaker Change: Reflects our year to date productivity and mechanical availability the assumptions are conservative.
Speaker Change: The forecast shows us to be.
Speaker Change: He chose us to be beginning to build cash in Q4.
Speaker Change: Longer term, we are looking at what is necessary to allow us to accelerate access into the new areas of three sisters and Gloria.
Allen Palmiere: This is effectively a third mine within our existing two. Currently, it looks possible to access these areas in the first quarter of 2026. This is potentially very exciting as the drilling continues to provide very exciting results. Cash continues to be tight and remains a key focus for the company. I'll now turn the call over to Alberto for an update on the operation.
Speaker Change: This is effectively a third buying within our existing too.
Speaker Change: Currently it looks possible to access these areas in the first quarter of 2026.
Speaker Change: This is potentially very exciting as a drilling continues to provide very exciting results.
Speaker Change: Cash continues to be tight and remains a key focus for the company.
Speaker Change: I'll now turn the call over to Alberto for an update on the operations.
Alberto Reyes: Thank you, Allen, and good morning to everyone. We successfully concluded our second quarter with zero lost time, demonstrating our unwavering commitment to safety. Our safety program has made significant progress, showcasing the resilience and capability of our team as they navigate challenging situations. Employee morale remains high, and when combined with the discipline we consistently observe, it creates the perfect synergy to drive our operations forward. The team's dedication and positive attitude are the key drivers of our continued success. DTGN's cost reduction initiatives have paid dividends this quarter.
Alberto: Thank you Ellen and good morning to everyone.
Alberto: We successfully concluded our second quarter with zero lost time incidents demonstrate demonstrating our unwavering commitment to safety are.
Alberto: Our safety program have made significant progress showcasing the resilience and capability.
Speaker Change: 14, as they navigate challenging situations.
Speaker Change: Employee morale remains high and when combined with a disciplined we consist consistently observed it creates the perfect synergy to drive our operations forward.
Speaker Change: Team's dedication and positive attitude are the key drivers of our continued success.
Speaker Change: BTG and cost reduction initiatives have paid dividends this quarter.
Alberto Reyes: Some projects are already showing cost savings, while others are improving efficiencies in our production cycle. Mining development costs have shown a decrease of 10% on a cost per meter basis. Other initiatives include improving negotiation terms through the supply chain, the introduction of alternative consumables, and an increase in suppliers offering consignment. Our operations encounter atypical challenges that impact our managed production in Q2 by approximately 15 percent. These challenges include roadblocks that disrupted the supply chain as well as the rotation cycle of key personnel to consecutive tropical storms that impact our operations in the crushing circuit and on our smaller scale ground conditions and the mechanical availability of critical equipment. It's important to recognize that these unpredictable circumstances have provided critical insights and opportunities for strategic adjustment.
Speaker Change: Some projects are already showcasing our ratio and cost savings, while others are improving efficiencies in our production cycles mining development costs have shown a decrease of 10% in a cost per meter basis.
Speaker Change: Initiatives and keep it.
Speaker Change: Improvement in negotiation terms some of the supply chain the introduction of alternative consumables and an increase in suppliers offering consignment.
Speaker Change: Our operation in counter a typical challenges that impacted our tonnage production in Q2 by approximately 50% this challenges into roadblocks that disrupted the supply chain as well as their rotation cycle of key personnel two consecutive tropical storms that impacted operations and the question circuit and on a smaller scale.
Speaker Change: Ground conditions and mechanical availability of critical equipment.
Speaker Change: As important to recognize that this unpredictable circumstances.
Speaker Change: I'll provide a critical insights and opportunities for strategic adjustments.
Alberto Reyes: Despite these hurdles, the team has maintained rigorous procedures, and we remain confident and robust, with production per quarter to reach approximately 94,000 tons. The processing plant is now operating at around 1,300 tons per day, in line with our 2024 target. I am pleased to report that we processed nearly 94,000 tons of ore, sold approximately 2,724 ounces of gold, and over 234,000 ounces of silver, equating to over 5,625 gold equivalent ounces. In addition, we sold 197 tons of copper, approximately 490 tons of lead, and more than 1,770 tons of zinc.
Speaker Change: Despite this hurdles the team has maintained rigorous procedures and we remain confident in the robustness.
Speaker Change: Production for quarter to reach approximately 94000 tons.
Speaker Change: Processing plant is now operating at around 1300 tons per day.
Speaker Change: In line with our 2024 targets.
Speaker Change: Im pleased to report that we processed nearly 94000 tonnes of ore sold approximately 2724 ounces of gold and over 234.
Speaker Change: <unk> thousand ounces of silver equating to over 5625 gold equivalent ounces.
Speaker Change: In addition, we sold 197 tonnes of copper approximately 490 tonnes of lead and more than 1007 770 tons of zinc.
Alberto Reyes: For the year to date, for June 30, we processed nearly 192,000 tons of ore, sold approximately 7,700 ounces of gold, and over 514,000 ounces of silver, equating to over 11,688 gold equivalent ounces. We further sold over 460 tons of copper, approximately 1,160 tons of lead, and close to 3,450 tons of zinc. Now turning to slide six.
Speaker Change: For the year to date through June 30, we processed nearly 192000 tonnes of ore sold approximately 7700 ounces of gold and over 514000 ounces of silver equating to over 11688 gold equivalent ounces.
Speaker Change: Further sold over 400 tons of copper approximately 1160 tons of lead.
Speaker Change: And close to 3450 pumps on zinc.
Speaker Change: Now turning to slide six.
Alberto Reyes: DTGM's capital expenditure is within the year's plan, investing $1.3 million in underground development. Cost-saving initiatives have reduced development unit costs by 10%. Similarly, infill drilling unit costs were also reduced by 20% in comparison to 2023's unit costs. $345,000 were invested in promising drill hole results, $318,000 in other sustaining costs, including works with the TSF closure plan, as well as various other smaller projects. Sustaining capital investment totaled $2.2 million, while growth investment reached $326,000, maintaining capital expenditures within annual guidance. However, we acknowledge that Q2 results fell short of our initial projections.
Speaker Change: Did the Gms capital expenditure is within the year's plan investing $1 $3 million in underground development.
Speaker Change: Cost saving initiatives have reduced development unit cost by 10%.
Speaker Change: Similarly, infill drill infill drilling unit costs were also reduced by 20% in comparison to 2020 <unk> unit costs.
Speaker Change: $345000 were invested in promising drill drill hole results.
Speaker Change: $818000 and all of the sustaining cost, including works with the Psf closer plan as well as various other smaller projects.
Speaker Change: Sustaining capital investments totaled $2 $2 million while growth investment.
Speaker Change: Reached $326000 maintaining capital expenditure within annual guidance.
Speaker Change: We acknowledge that Q2 results fell short of our initial projections. However, it is important to highlight the disciplined and positive drive demonstrated by our team. During this period the team effectively reduce costs, while upholding the highest standards of safety performance.
Chet Holyoak: However, it is important to highlight the discipline and positive drive demonstrated by our team during this period. The team effectively reduced costs while upholding the highest standards of safety performance. This commitment to excellence underscores our confidence in the team's ability to navigate challenges and maintain operational integrity. I'll now pass the presentation over to Chet to discuss the financial results.
Speaker Change: This commitment to excellence underscores our confidence.
Speaker Change: The ability to navigate challenges and maintain operational integrity.
Chet Holyoak: Thank you, Alberto. During the second quarter, we experienced a small decrease in our cash balance, and we ended the quarter with $5.3 million. The declining cash is primarily due to lower sales due to lower production, as we've just discussed. Operating Activities was $1.4 million for the year and includes almost 1.1 million dollars spent on exploration in Mexico and over $300,000 spent in Michigan related to Back 40 optimization. For the second quarter of 2024, we reported a net loss of $27.7 million, mainly due to a valuation allowance of $16.5 million to write off deferred tax assets in Mexico and the addition of $3.7 million in interest on our streaming liabilities due to increased gold prices.
Speaker Change: I'll now pass the presentation over to Chuck to discuss financial results.
Chuck: Thank you Alberto during the second quarter, we experienced a small decrease in our cash balance and we ended the quarter with $5 3 million and the declining cash is primarily due to lower sales due to lower production as we've just discussed.
Speaker Change: Yeah.
Speaker Change: Provided by operating activities was $1 4 million for the year and includes almost 1.1.
Speaker Change: Million dollar spent on exploration in Mexico and over $300000 spent in Michigan related to back 40 optimization.
Speaker Change: For the second quarter of 2024, we reported a net loss of $27 $7 million, mainly due to a valuation allowance of $16 5 million to write off deferred tax assets in Mexico.
Speaker Change: And the addition of $3 7 million in interest on our liabilities due to the increased gold prices.
Chet Holyoak: During the quarter, net sales of $20.8 million were 16% lower than the same period in 2023, due mainly to lower volumes of metal sold. While production costs for the quarter of approximately $17.8 million were slightly lower than the prior year, the significantly lower tons processed along with lower gold equivalent ounces sold resulted in an unfavorable impact on unit costs such as cost per ton processed and cost per gold equivalent ounce sold.
Speaker Change: During the quarter net sales of $28 million were 16% lower than the same period in 2023, due mainly to lower volumes of metal sold.
Speaker Change: While production costs for the quarter of approximately $17 $8 million were slightly lower than the prior year the significantly lower tonnes processed along with lower gold equivalent ounces sold resulted in an unfavorable impact on unit costs, such as cost per tonne processed and cost per gold equivalent ounce sold.
Chet Holyoak: The depreciation for the period is lower than depreciation for the same period in 2023, mainly because of lower UOP depreciation as a result of less tons mined. Finally, mining gross profit is lower in 2023 primarily due to the lower sales not being proportionally offset by lower production costs. For the quarter, Don David Gold Mine's total cash cost after co-product credits was $1,950 per gold equivalent outsold, and the total all-in sustaining cost per gold equivalent outsold was $2,661 per outsold.
Speaker Change: Depreciation for the period is lower than depreciation for the same period in 2023, mainly because of lower ERP depreciation as a result of less tonnes mined.
Speaker Change: Finally mining gross profit is lower in 2023, primarily due to the lower sales not being proportionally offset by lower production costs.
Speaker Change: For the quarter, Dan David Gold mines total cash cost after co product credits was $1950 per gold equivalent ounce sold and total all in sustaining cost per gold equivalent ounce sold was $2661 per ounce sold.
Chet Holyoak: Turning to slide A, we will discuss cash costs for the quarter. The two key drivers related to the increase in cash costs per gold equivalent ounce sold are the reduction in gold equivalent ounces sold and a reduction in co-product credits. The gold equivalent ounces are lower due to the lower tons mined and processed due to reasons already explained by Alberto, and the lower grade ore and recoveries realized during the quarter. While the above-mentioned drivers resulted in a negative impact for the quarter, we are seeing an increasing trend in metal prices, and the dollar is strengthening against the peso, which has offset some of the impact.
Speaker Change: Turning to slide eight we will discuss cash cost for the quarter.
Speaker Change: The two key drivers related to the increase in cash cost per gold equivalent ounce sold or the reduction in gold equivalent ounces sold and a reduction in co product credits.
Speaker Change: Gold equivalent ounces are lower due to the lower tonnes mined and processed due to reasons already explained by Alberto and the lower grade ore and recoveries realized during the quarter, while the above mentioned drivers resulted in a negative impact for the quarter. We are seeing an increasing trend in metal prices and the dollar is strengthening against the peso, which has offset some of the.
Speaker Change: Impact.
Speaker Change: Alan back to you. Thanks.
Alan Alberto: Thanks Chuck.
Allen Palmiere: We continue to deal with many challenges, but the team at the mine is responding well and is continually looking for ways to reduce operating costs and increase production. While there are no quick fixes, marginal gains move us in the right direction. We're not happy with our share price and continue to look for opportunities to unlock shareholder value. And with that, I'll turn the call over to the operator for questions.
Alan Alberto: We continue to deal with many challenges, but the team at the mine is responding well and is continually looking for ways to reduce operating costs to increase production.
Speaker Change: While there are no quick fixes marginal gains move us in the right direction.
Speaker Change: We're not happy with our share price and continue to look for opportunities to unlock shareholder value.
Speaker Change: Okay.
Speaker Change: And with that I'll turn the call over to the operator for questions.
Speaker Change: Yeah.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised, and should you wish to cancel your request, please press star followed by the two. And if you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Jake Sekelsky from Alliance Global Partners. Please go ahead.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your telephone keypad, you'll hear a prompt that Johan has been raised and should you wish to cancel your request. Please press star followed later too.
Johan: If you're using a speaker phone please lift the handset before pressing any keys one moment. Please for your first question.
Speaker Change: Your first question comes from the line of Jake Zukowski from Alliance Global Partners. Please go ahead.
Jacob Sekelsky: Hey Allen and team, thanks for taking my question.
Jake Zukowski: Hey, Alan and team thanks for taking my questions.
Allen Palmiere: Good morning, Jake. How are you doing today?
Alan Alberto: Good morning, Jay How're you doing today.
Jacob Sekelsky: Well, thank you. You mentioned the impact of the heavy rain and the wet ore on throughput rates during the quarter. Is there any other color you can provide here? I mean, should we expect that material to aid Q3 throughput rates, or how are you looking at that?
Alan Alberto: Well thank you.
Jake Zukowski: So you mentioned the impact of the heavy rain in the wet or on throughput rates during the quarter and is there any other color you can provide here I mean should we expect that material to aid.
Speaker Change: Q3 throughput rates or how are you looking at that.
Allen Palmiere: What happened was that in June, we had two tropical depressions back to back. The result of that was we had an abnormal amount of rain, notwithstanding the fact that it was the rainy season. What that did was it turned the fines in our ore that we fed to the crusher into basically mud, and the screens on the crusher plugged up, which really inhibited our ability to get material through the crusher and into the mill.
Speaker Change: What happened was that in June we had two tropical depressions back to back.
Speaker Change: The result of that was we had an abnormal amount of rain.
Speaker Change: Notwithstanding the fact that as rainy season.
Speaker Change: That did was it turns of fines in our ore that we feed to the crusher basically to Bud and the screens on the crusher plugged up which really inhibited our ability to get materials through the crusher and into the mill.
Allen Palmiere: The weather is back to normal. We get some occasional rain, but nothing like what we were experiencing in June. So at this stage, although I don't control the weather, we're not anticipating it to impact Q3 or Q4.
Speaker Change: The weather is back to normal.
Speaker Change: Got some occasional rain, but nothing like what we're experiencing in June.
Speaker Change: So at this stage.
Speaker Change: Although I don't control the weather.
Speaker Change: We're not anticipating it to impact Q3 or Q4.
Jacob Sekelsky: Okay, that's helpful. And then on the FX side, you mentioned we've seen the peso weaken quite a bit. Can you just remind us where you are with any hedging programs as far as foreign exchange goes? And if the peso is weakened to a level where you might start getting a bit more aggressive on the hedging side?
Speaker Change: Okay. That's helpful.
Speaker Change: And then on the FX side I mean, you mentioned, we've seen the peso.
We can quite a bit can you just remind us where you are with any hedging programs.
Speaker Change: As far as foreign exchange goes in and if the pesos. We can do a level, where you might start getting a bit more aggressive on the hedging side.
Speaker Change: Okay.
Allen Palmiere: Quick answer, Jake, is that we had a discussion at our board meeting yesterday. We are going to be looking very seriously at putting on some hedges for the Peso in the very near term. As of today, we are not hedged. But that was intentional because we were anticipating, not this trigger, but we were anticipating a collapse in the carry trade. And that has occurred, as you know, very, very rapidly.
Speaker Change: Quick answer Jay is that we had a discussion at our board meeting yesterday.
Jay: We are going to be looking very seriously at putting on some hedges for the peso in the very near term.
Jay: Today as of today, we are not hedged, but that was intentional because we were anticipating.
Jay: Perhaps not this trigger but we're anticipating a collapse in the carry trade.
Allen Palmiere: So we will be looking at putting in place some hedging on the peso. As you know, directionally 50 to 60% of our operating costs are denominated in the Mexican peso. So this has been a big move, and it has quite a dramatic impact on our operating costs.
Jay: And that has occurred as you know very very rapidly. So we will be looking at putting in place some hedging on the peso as you know it's direct some of the 50% to 60% of our operating cost.
Jay: It's denominated in Mexican pesos. So this has been a big move and that has quite a dramatic impact on our operating cost.
Jacob Sekelsky: makes sense. Okay, that's all for me.
Speaker Change: Makes sense, Okay. That's all for me.
Jack: Thanks Jack.
Heiko Ihle: Thank you, and your next question comes from the line of Heiko Ihle from H.C. Wainwright. Please go ahead.
Jack: Thank you and your next question comes from the line of Heiko.
Speaker Change: H C. Wainwright. Please go ahead.
Heiko Ihle: Hey there, thanks for taking my questions. I hope you guys are all doing well.
Heiko: Hey, there thanks for taking my questions Hope you guys are all doing well.
Allen Palmiere: All good, Heiko. I hope your summer is going well for you.
Heiko: All good hydro hydro someone's going well for you as well.
Heiko Ihle: I'm in Florida. It's plenty hot.
Speaker Change: I'm in Florida, that's plenty hot.
Speaker Change: Building a bit on that question.
I thought that was your choice.
Speaker Change: [laughter], yes, otherwise and I have zero rate right.
Jake Zukowski: Building a bit on Jake's question you listed two factors in your prepared remarks that impacted the operation success of frightens during hurricane season, we sort of discussed and the up normal work delays from the election, obviously I assume the inefficiencies from the election won't be an impact in the current quarter.
Heiko Ihle: Building a bit on Jake's question, you listed two factors in your prepared remarks that impacted operations. Excessive rains during hurricane season, which we sort of discussed, and the abnormal work delays from the election. Obviously, the inefficiencies from the election won't have an impact on the current quarter since the election was obviously done in June. But how about the weather? Has there been any impact at all in July and August? And if I could trouble you with maybe the dollar impact that you think those two factors had in Q2 as well?
Speaker Change: Since the election was obviously done in June, but how about the weather I mean has there been any impact at all in the July and August and if you could maybe had a trouble you for maybe the dollar impact that you think those two factors had in Q2 as well.
Allen Palmiere: I'm going to deal with the easy part of that question first. And that is, we're not anticipating any repetition. That being said, all the prognosticators are forecasting a very active hurricane season. You know, I don't know any better than they do. But we're currently not anticipating any significant stoppage. It is still the rainy season. We're still getting occasional rains, but nothing significant, and it's not impacting production at all, in terms of quantification.
Speaker Change: I'm going to deal with the easy part of that question first and that is.
Speaker Change: We're not anticipating anticipating any repetition that being said.
Speaker Change: All the Prognosticators are forecasting a very active hurricane season.
Speaker Change: <unk>.
Speaker Change: I don't know any better nature.
We are currently not anticipating any significant stoppage.
Speaker Change: It is still the rainy season, and we're still getting occasional rains, but nothing significant and its not impacting production at all.
Speaker Change: Yes.
Speaker Change: In terms of quantification.
Allen Palmiere: Putting a dollar amount on it is going to be difficult, but what we did lose was effectively a week of production. That would translate into almost 6,000 tons of ore through the mill. 6,000 tons on the on a 36,000 ton forecast, you're looking at one-sixth of your production for the month. That's not a resultion, a down stroke in revenue by about one-sixth while your costs largely are continuing. That's how I would try and quantify the direct impact.
Speaker Change: Putting a dollar amount on it is going to be difficult, but what we did lose as effectively a week of production.
Speaker Change: That would translate into almost 6000 tonnes of ore through the mill.
Speaker Change: 6000 tons.
Speaker Change: On a 36000 ton forecast youre looking at so one six.
Speaker Change: Production for the month.
Speaker Change: Got it.
Speaker Change: It results in.
Speaker Change: Downstroke in revenue by about one 6% while your costs largely are continuing.
Speaker Change: That's all I would try and quantify the direct impact HEICO.
Heiko Ihle: I'm not going to lie, that's a much more detailed answer than I thought I was going to get out of you on a public call. Fair enough.
Speaker Change: I'm not going to lie that's a much more detailed answer to what I thought I was going to get out of you on a public call.
Speaker Change: Okay.
Allen Palmiere: You had a slide for your drilling in the webcast presentation. Nice to see the strong focus across the third exploration hole, 16 NCO holes. What are you seeing with pricing for drilling, maybe both in the current quarter but also maybe a little bit of an outlook for Q4?
Speaker Change: Fair enough you you had a slight for your drilling in the webcast presentation are nice to see the strong focus across third exploration hold 16 NCR holes.
Speaker Change: What are you seeing with pricing for drilling maybe both in the current quarter, but also maybe a little bit of an outlook for Q4.
Heiko Ihle: Well, it's interesting. We made a change to our drilling contractor a few months ago, and we started utilizing a Mexican drilling company who has actually been very professional and has performed very well for us. The result of that is our drilling costs per meter have decreased relatively significantly, and we're not forecasting any significant increase on a go forward basis. We've developed a very good relationship with this particular contractor, and they are working with us very proactively to ensure that their costs don't climb. I'm happy with them, and I'm not expecting any significant change.
Speaker Change: Well, it's interesting we made this change in our drilling contractor or a few months ago.
Speaker Change: And as we started utilizing a Mexican drilling company who has been.
Speaker Change: Actually very professional and has performed very well for us as a result of that as our drilling costs.
Speaker Change: Per meter has decreased relatively significantly.
Speaker Change: We're not forecasting any significant increase on a go forward basis.
Speaker Change: We've developed a very good relationship with this particular contractor.
Speaker Change: They're working with us very proactively to ensure that their costs don't dark cloud.
Speaker Change: I am happy with the not expecting any significant change.
Heiko Ihle: Very good. Thank you so much. I'll get back to you.
Very good. Thank you so much I'll get back in queue.
Heiko: Thanks Heiko.
John Baer: Thank you. And your last question comes from the line of John Baer from Asset Vault Advisors. Please proceed.
Speaker Change: Thank you and your last question comes from the line of John Bair from asset Advisors. Please proceed.
John Baer: Thank you. Good morning, Allen, and I appreciate your taking my call and asking questions. Good morning, Chuck. Good morning, John.
John Bair: Thank you good morning al.
John Bair: Alan and I appreciate your taking my call my questions are on earnings.
Allen Palmiere: On a bigger picture, I mean, definitely benefited from increased metals prices. That's very good. What are you seeing in the way of increased... grades, if any? And it seems to me that that's what really needs to happen here. I'm going to assume that your millage rate and throughput and so forth will increase if these weather conditions abate. But what are you seeing in the way of the potential for grade improvement in the next few quarters that will help your financial results?
Speaker Change: On a bigger picture I mean definitely benefited by increased.
Speaker Change: Metals prices Thats very good.
Speaker Change: What are you seeing in the way of.
Speaker Change: Of increased.
Speaker Change: Great if any and it seems to me that that's what really needs to happen here.
Speaker Change: I assume that your your millage rate and throughput and so forth will increase if these weather conditions abate.
Speaker Change: But what are you seeing in the way of the potential for great.
Speaker Change: Improvement in the next few quarters that will help your financial result.
Speaker Change: Yeah.
Speaker Change: John in my prepared remarks, what I indicated is we're anticipating beginning to rebuild our cash balance by the end of Q4.
Speaker Change: That is directly related to great.
Allen Palmiere: And while we're not forecasting extremely high grades, for the next 18 months, the grades will be... No, I'm misleading here. In Q3, the grades are a little bit better. In Q4, they will improve again, and then they will stay relatively static for most of 2025.
Speaker Change: While we're not forecasting extremely high grades.
Speaker Change: For the next 18 months the grades will be.
Speaker Change: No I'm misleading here.
Speaker Change: Q3, the grades are a little bit better Q4, they will improve again and then they will stay relatively static for most of <unk>.
Speaker Change: 2025.
Allen Palmiere: We're currently forecasting that in Q1 of 2026, and hopefully earlier, we will be getting into what we're calling the Three Sisters and Aurea area. Effectively, what this is, is a new mineralized zone that we discovered about a year and a half ago and have been actively exploring, has already resulted in the identification of mineable ore at very good grades, significantly higher than what we are currently experiencing. We have every reason to believe that we will have continued exploration success and that this new zone will be the future of the Don David Mine. If you're familiar with it, the first, followed by Twitch Facts. This Three Sisters Gloria area is the third discreet, mineralized system that we've identified in the area.
Speaker Change: We're currently forecasting that Q1 of 2026 and hopefully earlier we.
Speaker Change: We will be getting into what we're calling the three sisters then.
Speaker Change: Oreo.
Speaker Change: Area <unk>.
Speaker Change: <unk>. This is a new mineralized zone that we discovered about a year and a half ago and actively exploring.
Speaker Change: It.
Speaker Change: Has already resulted in the identification.
Speaker Change: <unk> of <unk>.
Speaker Change: Mineable ore at very good rates significantly higher than what we're currently experiencing.
Speaker Change: We have every reason to believe that we will have continued exploration success.
Speaker Change: New zone will be the future of.
Speaker Change: The Dawn David mine.
Speaker Change: If youre familiar with it the first area of mineralization that we mined was called to get reached a system mhm followed by switchback.
Speaker Change: This three sisters flurry of area has the third discrete.
Speaker Change: Mineralized system that we've identified in the area, it's very close to existing workings.
Speaker Change: <unk>.
Allen Palmiere: It's very close to existing work, and that is when I can foresee without, and in qualification, increased grades going through the mill. We will see some improvement over the next 18 months, but that's when I expect to see a bit of a step change.
Speaker Change: That is when I can foresee without.
Speaker Change: Any qualification increased grades going through the mill.
Speaker Change: We will see some improvements over the next 18 months, but that's what I expect to see a bit of a step change.
John Baer: Okay, yeah, I'm familiar with the first few minds there. And I'm assuming, I have to go back and look, but You've probably released some of the core results, the ongoing for the new, and I don't have it in front of me here, the sisters.
Speaker Change: Okay Yep Yep.
Speaker Change: Similar here with this is the.
Speaker Change: First scale.
Speaker Change: Mines there.
Speaker Change: I'm, assuming I have to go back and look but.
Speaker Change: You've probably release.
Speaker Change: Some of the.
Speaker Change: Core results or the ongoing for the.
Speaker Change: For the new.
Speaker Change: And I don't have it in front of me here.
Speaker Change: Sisters.
Allen Palmiere: We have, in fact, issued a couple of press releases over the last few months dealing with drill results, primarily from the Three Sisters Fluorine.
Speaker Change:
Speaker Change: We have we have in fact issued a couple of press releases over the last few months dealing with drill results primarily from the three sisters, Florida area right.
John Baer: Right. I'll go back and look at those. Yeah. I'll go back and look at those. Okay. They'll give you a pretty good indication about true thickness and grade, John.
Speaker Change: I can look at those yes, I'll go back and look it does okay.
Speaker Change: I'll give you a pretty good they're both true thickness and great job.
Allen Palmiere: Right. Okay. Very good. Then my other question is, it wasn't in the press release. There was a little reference to, I think it was 300,000 towards BAC 40. Can you give us any updates on where you stand with that? Is it in limbo right now, or what's going on?
Speaker Change: Okay very good.
Speaker Change: And then my other question is it wasn't in the in the press release.
Speaker Change: There was a little reference to I think it was 300000 towards back 40 can you give us any.
Speaker Change: Updates on where you stand with that kind of is it is it in limbo right now or what's going on there.
John Baer: I don't like the term limbo, but it's not inappropriate. Well, it hasn't progressed, unfortunately. No, you're absolutely right.
Speaker Change: I don't like the term limbo, but it's not.
Speaker Change: Well it hasn't hasn't progressed unfortunately.
Speaker Change: No you're absolutely right.
Allen Palmiere: We're at a state now where the next step will be concluding a feasibility study and getting into the permitting exercise and the current Financial Climate for junior companies. It would be virtually impossible for us to find out, and rather than spend money on BAC40 currently, what we've chosen to do is spend the money on exploration at Don David where we know we can generate cash. It's going to be dependent on.
Speaker Change: We're at a stage now where the next step will be concluding concluding.
Speaker Change: Including a feasibility study.
Speaker Change: Doing good.
Speaker Change: Getting into the permitting exercise in the current.
Speaker Change: Financial climate for junior companies.
Speaker Change: It would be.
Speaker Change: Virtually impossible for us to finance it.
Speaker Change: And rather than <unk>.
Speaker Change: Spend money on back 40 currently what we've chosen to do is spend the money on exploration, Don David where we know we can generate cash flow.
Speaker Change: It's going to be dependent.
Speaker Change: Two things one our ability to generate excess cash out of Mexico.
Allen Palmiere: One is the ability to generate excess cash out of Mexico. And the second one is going to be the state of the United States. Capital Markets are probably defined for the junior resource sector and hopefully will enable us to get it financed.
Speaker Change: The second one is going to be the state of C.
Speaker Change: Capital markets broadly defined for.
Speaker Change: For the junior resource sector, hopefully enabled us to get it financed.
John Baer: Okay, and then there's another aspect, too, and of course, that's the one that you've been dealing with, and that's the environmental aspect and pushback there. Is there any change in the climate with that, so to speak?
Speaker Change: Okay.
Speaker Change: And then there was another aspect to and of course, that's the one that you've been dealing with and that's the.
Speaker Change: The environmental aspect and pushed back there is there any change in the climate with that so to speak.
Allen Palmiere: I... John, I...
John Baer: Thank you. Bye. Bye.
John Bair: Hi, John.
Allen Palmiere: I know there's always noise around permitting, but the reality is... Michigan is a good jurisdiction for permitting. The state controls all of the permits; there's no EPA involvement. It's strictly one agency within the state that controls everything, and they're very professional and very knowledgeable about mining. We've had an ongoing dialogue with them now for several years, and We have to go through the process, but as long as we do our job properly, I feel very confident in our ability to get permits on a timely basis. In my mind, the risk is I won't. There's always a risk, but it's relatively low, in my opinion.
John Bair: I know, there's always noise around permitting but the reality is.
John Bair: Michigan is a good jurisdiction for permitting.
Speaker Change: Regulated states controls all of the permits that are still EPA involvement.
Speaker Change: It's strictly one agency within the state the controls all of them.
They are very professional and very knowledgeable about mining.
Speaker Change: We've had an ongoing dialogue with them now for several years.
Speaker Change: Yes.
Speaker Change: We have to go through the process, but as long as we do our job properly I feel very confident in our ability to get.
Speaker Change: Permits on a timely basis.
Speaker Change: Yes.
Speaker Change: In my mind the risk is.
Speaker Change: There is always risk, but it's relatively low in my mind.
Okay.
Speaker Change: Fair enough.
John Baer: Thank you very much for taking the questions, and we look forward to... Monitoring and following your progress.
Thank you very much for taking the questions and look forward to.
Speaker Change: Monitoring and following your progress.
Allen Palmiere: My pleasure, John, and I hope to have better news in the future.
Speaker Change: My pleasure, John and I hope to have better news in the future.
John Baer: Very good. Thank you.
Speaker Change: Very good thank you.
Speaker Change: Okay.
Allen Palmiere: Thank you. That concludes our question and answer session. I'll now hand the call back to Mr. Allen Palmiere for any closing remarks.
Speaker Change: Thank you that concludes our question and answer session I will now hand, the call back to Mr. Alexander for any closing remarks.
Allen Palmiere: And I would like to thank everyone for taking the time to join us today. It is a beautiful summer day, hopefully not too hot. And I look forward to speaking to you all at our Q3 conference call, which will be scheduled for early November. Thank you again.
Mr. Alexander: Thank you and I would like to thank everyone for taking the time to join us today.
Operator: Thank you, and this concludes today's call. Thank you for participating. You may all disconnect.
Mr. Alexander: It is a beautiful summer day, hopefully not too hot.
Speaker Change: And I look forward to speaking to you all at our Q3 conference call. It will be scheduled for early November.
Speaker Change: Thank you again.
Speaker Change: Good afternoon.
Speaker Change: Thank you and this concludes today's call. Thank you for participating you may all disconnect.